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SOUTH AFRICA’S ALLUVIAL DIAMOND DEPOSITS JOHN BRISTOW SADPO WORKSHOP – 22 MAR 2017 Global Diamond Network A UNIQUE, BUT UNDER-DEVELOPED, UNDER-THREAT BUSINESS OPPORTUNITY www.globaldiamonds.co.za 1 Alluvial Diamond Deposits of South Africa Unrivalled Diamond Deposits 01 02 03 04 Global Diamond Network These diamond deposits are unrivalled anywhere else in the world. We are not developing / exploiting these deposits optimally. Consequently RSA and its provinces (particularly Northern Cape and North West) are not benefitting from job creation, taxes and royalties. Unless we work together to find a sensible, practical solution, we ALL lose. 2 Alluvial Diamond Mining Industry statistics South Africa em 25 000 2004 2008 2012 2017 The implementation of The MPRDA The global financial crash The revision and implementation of MPRDA Current 6 000 2 000 4 500 2000 Mining companies 1000 Mining companies 170 Mining companies 150 Mining companies 3 000 1 000 170 150 2004 2005 2008 2011 2012 2014 2017 Sources: JM Farrell, MSc, 2012 (UFS) | SADPO, JW Bristow Global Diamond Network 3 Distribution of Alluvial Diamond Deposits Southern Africa Global Diamond Network 4 Origin of Alluvial Diamond Deposits River milling + attritioning upgrades value of alluvial diamonds Uplift Erosion Alluvial Terrace Deposits Deposition Eroding Kimberlites Cullinan 1200 Venetia 600 Kimberley Jwaneng 84 240 million years Global Diamond Network Longshore drift weather / wind Raised Beaches Atlantic Ocean Drowned Beaches 5 RSA Alluvial Deposits Overview of Characteristics and Returns Ultra-low Grade: Today 1 carat per 100 tonnes is a high grade (1 part per 100 million) Extensive: mostly associated with the Vaal and Orange Rivers, and ancient feeders to these two unique drainages Global Diamond Network Benign on the environment Requires very detailed practical geology to delineate and mine successfully Capital requirements are relatively small relative to other commodities ie. coal, gold and platinum Large shallow open cast mining This should be a growth sector for existing and new entrants if sensibly enabled, managed and supported. 6 Middle Orange River Alluvial Gemstones Source: Manhatten Diamonds 59.6-Carat Pink Star Diamond Sells For World Record $83 Million (Sotheby’s November 2013) 14.82-Carat Orange Diamond Sells For A World Record $35.5 Million (Christie’s November 2013) Global Diamond Network 7 Average Diamond Prices per Carat Typical Alluvial Diamond Deposits 2017 Krone (Limpopo Province) ~US$125 Ventersdorp ~US$650 North West Province ~US$700 Riet River (Schutsekama) ~US$2 200 MOR (Hopetown – Douglas) ~US$2 500 MOR (Douglas – Prieska) ~US$2 200 LOR (Baken) ~US$1 500 World Diamond Average Global Diamond Network ~US$92 8 Mentoring Challenges with Alluvial Diamond Mining 01 02 Global Diamond Network Alluvial diamonds are challenging minerals to mine. Very limited modern and reliable published information on Alluvial Diamond Deposits – very low grade, great price variability. 03 Most small to medium scale Alluvial Diamond mines are private family businesses. 04 Very few new entrants into the industry – no one to mentor? 9 Securing Mineral Rights Prerequisites and Qualifiers Require rapid turn-around of Prospecting/Mining permit applications Prospecting Permits for alluvial diamonds should go to alluvial miners – not to people with no experience Small – Medium scale Alluvial Miners do not have a stand-alone prospecting division – we need to mine ASAP Small miners have to multi-task and manage all aspects of their businesses alone Require reliable modern geological information Large portions of most alluvial diamond deposits are uneconomic to mine Junior miners, including small diamond miners, require separate dispensation to large scale miners QUALIFIERS • We are committed to proper work, labour, H+S and environmental practices. • We acknowledge that there have been ‘bad apples’ in the business, and probably still are. • The aim of SADPO is to create a culture among its members which achieves best practices across all facets of our alluvial mining businesses. The more lawyers, experts, inspections, Section-54’s, and ‘down-time’, the less the cash flow, the quicker the industry shrinks, and scarce employment opportunities are lost Global Diamond Network 10 Legislation Challenges South Africa Alluvial Diamond Mining Consume time and money – impacts cash flow negatively Global Diamond Network 01 Lack of Policy consistency 02 RSA is a ‘no-go’ for mining investors (see latest Fraser Institute Report) 03 Mining right applications – slow processing + awards, fronting, middle-men, ‘use or lose’ should apply 04 B-BBEE requirements – expensive, many supposed partners want ‘cash-out’, but provide no ‘value add’ 05 Social and labour requirements / responsibilities 06 Health and Safety requirements 07 Environmental requirements 08 Water use licenses 11 Fraser Institute Report 2017 • RSA ranked 74 out of 104 global mining jurisdictions • “On policy perception alone, ignoring geology, SA now ranks as the thirdleast attractive mining jurisdiction in Africa, followed by Zimbabwe and South Sudan. This is obviously concerning," • “There is a grave risk to ownership with the government’s track record on passing and then modifying laws to achieve policy goals. The environment in SA is not predictable," • Yet RSA is considered to have +2.5 Trillion Dollars of untapped mineral resources in the ground, and was once considered the worlds premier mining country – so what went wrong ? Global Diamond Network 12 Other Challenges South Africa Alluvial Diamond Mining • • • • • Section-54 stoppages Lack of capacity in State Departments Lack of capacity and resources in the Provincial and Municipal Departments • Poor roads, medical facilities, housing, transport and services in general • Different expectations between DMR and Municipal authorities – particularly in SLP requirements Lack of education and training at all levels Spill-over effects of alcoholism, absenteeism, HIV/AIDS, and other community social challenges Global Diamond Network 13 Other Challenges …Continued • Unsustainable expectations (‘get rich quick’ proves unsuccessful) • Lack of skilled and experienced black entrepreneurs • Fronting, on-selling on MR’s • Lack of access to funds for new entrepreneurs • Lack of modern information, geological and other Global Diamond Network 14 Proposed MPRDA Amendments ?? March 2017 reports ...? 01 “Small diamond mining permits (~1.5ha) can only be awarded to applicants with 50%+1 black shareholding?” 05 What is the plan for the illegal miners on the Kimberley “Floors”? 02 Where are the skills, experience, funding, geological information and support to sustain these entrepreneurs? 03 04 Sadly these unsustainable ventures often become outlets for illicit goods The industry has been active for ~150 years – “rich” ground is mined out, hence require larger capital intensive operations Global Diamond Network 15 Solutions for Positive Outcomes Strong, honest 2-way communication Transparency and trust – from ALL parties Regular, short workshops – share ideas, address issues openly, find solutions Training and mentorship programmes to build capacity Partnerships and flexible solutions Political and Policy consistency Access to funding Long term plan for our industry Global Diamond Network 16 CONTACTS THANK YOU QUESTIONS? LYNDON DE MEILLON Mobile: +27 82 600 6627 Email: [email protected] JOHN BRISTOW Mobile: +27 82 571 3004 Email: [email protected] Global Diamond Network 17